ADM 1340 Chapter Notes - Chapter 13: Inventory Turnover, Debt Service Coverage Ratio, Accrual

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25 Apr 2016

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ADM 1340 Full Course Notes

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Purpose and content of the statement of cash flows: purpose: help investors, creditors, and other assess: The reasons for the difference between pro ts and cash provided or used by operating activities. The investing and nancing transactions during the period, or why assets and liabilities have increased or decreased. The company"s ability to generate future cash ows: content: The information reported in the statement of cash ows includes: cash receipts, cash payments, net change in cash. The statement of cash ows classi es cash receipts and cash payments into three types of activities: operating activities, investing activities, financing activities. Thursday, march 31, 2016: non cash activities include: Exchanges of property, plant, and equipment: signi cant investing and nancing activities that do not affect cash are not reported in the body of the statement of cash ows. However these activities are reported in a note to the nancial statements.

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Erroneous Statement of Cash Flows

Ryan Company's bookkeeper prepared the following 2016 statement of cash flows:

Flows of Cash Statement December 31, 2016
Sources (Inflows) of Cash
Net Source from Operations
Net income	$47,800
Add: Cash receipt from sale of land	6,500
Inflow from issuing 10% bonds payable	25,000
Depreciation expense	13,200
Reduction in inventory	1,900
Less: Outflow to buy equipment	(16,400)
Increase in prepaid expenses	(700)
Cash (principal) paid on long-term note	(9,500)
ordinary gain	(2,000)
Total source from operations		$65,800
Other Sources (Inflows) of Cash
Loss on sale of land	$2,300
Increase in accounts payable	1,000
Cash from issuing preferred stock	38,700
Patent amortization expense	2,100
Total other sources of cash		44,100
Sources (Financing) Not Affecting Cash
Issuance of common stock for patent		11,000
Total inflows of cash		$120,900
Uses (Outflows) of Cash
To purchase building	$(62,000)
Increase in accounts receivable	(7,800)
For acquiring marketable securities	(7,100)
Decrease in income taxes payable	(1,400)
Total uses of cash		(78,300)
Uses (Investing) Not Affecting Cash
Acquisition of patent by issuing common stock		(11,000)
Net inflow before dividends		$ 31,600
Less: Cash dividends		(24,000)
Net increase in cash		$7,600
Cash, January 1, 2016		15,300
Cash, December 31, 2016		$22,900

After a thorough investigation, you have determined that the amounts of the items listed on the statement are correct. However, you notice several items that are incorrectly classified and reported.

Required

Prepare a corrected 2016 statement of cash flows for the Ryan Company. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

Operating Activities

________________ __________

Adjustment for non cash income items:

________________ __________

Adjustments for cash flow effects from working capital items:

________________ __________

Net cash provided by operating activities ____________

Investing Activities:

________________ __________

Net cash used for investing activities _________

Financing Activities:

________________ __________

Net cash provided by financing activies _________

Net increase in cash _________

Cash, january 1, 2016 _________

Cash, december 31, 2016 _________

Investing and Financing Activities not Affecting Cash

Investing Activities:

Acquistion of patent by issuing commons stock ______________

Financing Activities:

Issuance of common stock for patent ____________

ivorymallard438

The Murdock Corporation reported the following balance sheet data for 2016 and 2015:

	2016			2015
Cash	$	84,035		$	26,555
Available-for-sale securities (not cash equivalents)		18,500			91,000
Accounts receivable		86,000			73,650
Inventory		171,000			150,400
Prepaid insurance		2,040			2,600
Land, buildings, and equipment		1,262,000			1,131,000
Accumulated depreciation		(616,000	)		(578,000	)

Total assets	$	1,007,575		$	897,205

Accounts payable	$	81,740		$	154,670
Salaries payable		22,400			27,500
Notes payable (current)		30,400			81,000
Bonds payable		206,000			0
Common stock		300,000			300,000
Retained earnings		367,035			334,035

Total liabilities and shareholders' equity	$	1,007,575		$	897,205

Additional information for 2016:

Sold available-for-sale securities costing $72,500 for $77,600.

Equipment costing $20,000 with a book value of $5,600 was sold for $6,900.

Issued 6% bonds payable at face value, $206,000.

Purchased new equipment for $151,000 cash.

Paid cash dividends of $23,000.

Net income was $56,000.

Required:

Prepare a statement of cash flows for 2016 in good form using the indirect method for cash flows from operating activities. (Amounts to be deducted should be indicated with a minus sign.)

MURDOCK COMPANY
Statement of Cash Flows
For the Year Ended December 31, 2016
Cash flows from operating activities:

Adjustments for noncash effects:









Net cash flows from operating activities
Cash flows from investing activities:




Net cash flows from investing activities
Cash flows from financing activities:




Net cash flows from financing activities

Cash balance, January 1
Cash balance, December 31

roseyellowjacket678

The comparative balance sheet of Canace Products Inc. forDecember 31, 2016 and 2015, is shown as follows:

1		Dec. 31, 2016	Dec. 31, 2015
2	Assets
3	Cash	$643,460.00	$679,530.00
4	Accounts receivable (net)	566,490.00	548,320.00
5	Inventories	1,010,720.00	982,600.00
6	Investments	0.00	240,910.00
7	Land	519,510.00	0.00
8	Equipment	879,710.00	680,990.00
9	Accumulated depreciation-equipment	(243,750.00)	(200,970.00)
10	Total assets	$3,376,140.00	$2,931,380.00
11	Liabilities and Stockholdersâ Equity
12	Accounts payable (merchandise creditors)	$772,290.00	$748,770.00
13	Accrued expenses payable (operating expenses)	63,970.00	69,800.00
14	Dividends payable	8,000.00	7,040.00
15	Common stock, $2 par	56,000.00	32,000.00
16	Paid-in capital: Excess of issue price over parâcommon stock	408,000.00	192,000.00
17	Retained earnings	2,067,880.00	1,881,770.00
18	Total liabilities and stockholdersâ equity	$3,376,140.00	$2,931,380.00

The income statement for the year ended December 31, 2016, is asfollows:

1	Sales		$5,974,620.00
2	Cost of merchandise sold		2,451,470.00
3	Gross profit		$3,523,150.00
4	Operating expenses:
5	Depreciation expense	$42,780.00
6	Other operating expenses	3,099,440.00
7	Total operating expenses		3,142,220.00
8	Operating income		$380,930.00
9	Other expense:
10	Loss on sale of investments		(64,890.00)
11	Income before income tax		$316,040.00
12	Income tax expense		102,160.00
13	Net income		$213,880.00

Additional data obtained from an examination of the accounts inthe ledger for 2016 are as follows:

A.	Equipment and land were acquired for cash.
B.	There were no disposals of equipment during the year.
C.	The investments were sold for $176,020 cash
D.	The common stock was issued for cash.
E.	There was a $27,770 debit to Retained Earnings for cashdividends declared.

Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.

Labels and Amount Descriptions

Cash paid for dividends

Cash paid for purchase of equipment

Cash paid for purchase of land

Cash paid for purchase of treasury stock

Cash payments for income taxes

Cash payments for merchandise

Cash payments for operating expenses

Cash received from customers

Cash received from sale of common stock

Cash received from sale of investments

December 31, 2016

Decrease in cash

Depreciation

For the Year Ended December 31, 2016

Gain on sale of investments

Increase in cash

Issuance of common stock for acquisition of land

Issuance of common stock for purchase of equipment

Loss on sale of investments

Net cash flow from financing activities

Net cash flow from investing activities

Net cash flow from operating activities

Net cash flow used for financing activities

Net cash flow used for investing activities

Net cash flow used for operating activities

Canace Products Inc.

Statement of Cash Flows

1	Cash flows from operating activities:
2
3
4
5
6
7
8	Cash flows from investing activities:
9
10
11
12
13
14	Cash flows from financing activities:
15
16
17
18
19	Cash at the beginning of the year
20	Cash at the end of the year

blushmarten502

ADM 1340 Chapter Notes - Chapter 13: Inventory Turnover, Debt Service Coverage Ratio, Accrual

ADM 1340 Full Course Notes

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